The International Monetary Fund has told Europe that it needs to strengthen its financial rescue fund.
In its latest updated World Economic Outlook, the IMF said unless that is done there is a greater risk of renewed global instability as tax cuts in the US and buoyant emerging economies help propel the recovery elsewhere.
The stark difference – what the IMF calls a “two speed recovery” – can be seen in its forecast for this year. That includes 9.6 percent growth for China, three percent for the US and just 1.5 percent for the euro zone and it would be worse but for the strength of the German economy.
The IMF believes that the global economic recovery began to gain pace in 2010 from a package of US tax cuts enacted late last year. But it says advanced economies still pose the biggest risk to recovery.
The Fund is also keeping the pressure on Beijing to allow the yuan to strengthen in value against other currencies. At a news conference the IMF’s head of research Olivier Blanchard called it “logical” and “necessary” and said it could be done faster.